Free Markets, Free People

Economy

Cap-and-tax: The game plan to make it a reality

The Environmental Protection Agency (EPA) has decided it has waited long enough for Congress to do something about greenhouse gasses (GHG).  So the unelected bureaucracy has decided it will take matters into its own hands and regulate GHG itself:

Starting in July 2011, new sources of at least 100,000 tons of greenhouse gases a year and any existing plants that increase emissions by 75,000 tons will have to seek permits, the agency said.

In the first two years, the E.P.A. expects the rule to affect about 15,550 sources, including coal-fired plants, refineries, cement manufacturers, solid waste landfills and other large polluters, said Gina McCarthy, the agency’s assistant administrator.

She said the rule would apply to sites accounting for about 70 percent of the nation’s greenhouse gas emissions. “We think this is smart rule-making, and we think it’s good government,” she said.

Now you can call it “smart rule-making” or “permitting” or any of a number of nifty things, but in reality the cost of regulatory compliance and the cost of permitting will increase the cost of operation – a cost that will be passed on to the consumer.

Of course, EPA Administrator Lisa Jackson, the unelected administrator making this decision, is pretty sure that this is a wonderful way to “spark clean technology innovation” and save the planet “for the children”:

“After extensive study, debate and hundreds of thousands of public comments, EPA has set common-sense thresholds for greenhouse gases that will spark clean technology innovation and protect small businesses and farms,” said EPA Administrator Lisa P. Jackson. “There is no denying our responsibility to protect the planet for our children and grandchildren. It’s long past time we unleashed our American ingenuity and started building the efficient, prosperous clean energy economy of the future.”

Question: Does anyone think “American ingenuity” hasn’t been “unleashed” on the clean energy problem?  With the potential payoff, obviously it has.  Instead, what this does is what the President said he wanted to do prior to taking office during an interview – it begins the process of raising conventional power generation to a cost level that makes “clean power” seem less expensive by comparison.  And if Congress won’t do it, hey, that’s what activists turned “administrators” are for – interpret the Clean Air Act as it has never been interpreted before and serve the agenda.

Of course you don’t have to “question the timing” at all – consider it all part of the orchestration plan for providing the impetus necessary to pass the Kerry-Lieberman.  Manufacture a “crisis”, provide a government solution:

Senator John Kerry, a Massachusetts Democrat and one of the two sponsors of the climate bill, seized on Thursday’s announcement to argue for the urgency of passing it. “Today we went from ‘wake-up call’ to ‘last call,’ ” he warned in a statement.

Heh … nothing obvious about this at all. Make the case that the EPA is usurping the prerogative of Congress and you’re sure to attract bi-partisan support on that. But, of course, that can’t mean just passing simple legislation stripping the EPA of that power can it? Lisa Murkowski (R-AK), the ranking Republican on the Senate Energy and Natural Resources Committee has actually introduced a disapproval resolution to do that, but with 35 Republican and only 3 Democrats, it has little chance of passing.

Murkowski says this will cause “an economic train wreck” if allowed to go into effect. With it targeting what’s left of “big manufacturing” and, of course, the majority of conventional power generation – in the middle of a deep recession – it’s hard to argue she’s incorrect.

More of your government at work trying to lessen the economic impact of the recession and create more jobs. /sarc

~McQ

[ad] Empty ad slot (#1)!

John Kerry was for off-shore drilling before he was against it

Senator’s John Kerry and Joe Lieberman introduced their 1,000 page climate change bill yesterday.  Unfortunately, “The Hill” only deals with the political aspects of the bill and doesn’t tell us much about what it contains.  Of interest was this:

The bill has the support of the Edison Electric Institute, a large trade group that represents for-profit utilities, and encouraging statements also poured in from companies including GE, although, like many, the company hedged slightly and said it “supports the process” that Kerry and Lieberman initiated.

Oil giant Shell issued a supportive statement, and Kerry also cited support from BP and ConocoPhillips. The bill’s method for addressing transportation-sector emissions is more to the liking of some refiners, who bitterly opposed the House climate change bill that passed last year.

The point, of course, is these companies are settling for the lesser of two evils.  And, of course, there’s a bit of crony capitalism thrown in for good measure.  I, on the other hand,  oppose the imposition of any carbon buying scheme (tax) until I see a lot more conclusive science saying we have a warming problem caused by CO2.

Anyway, as to the title, IBD covers that:

The bill, authored by Sens. John Kerry, D-Mass., and Joe Lieberman, I-Conn., would let a state ban drilling within 75 miles of its coastline vs. 3 miles currently.

A state also would be able to veto neighbors’ drilling projects if a mandatory study indicated that an accident could harm the state’s economy or environment.

This is a major reversal from late ’09, when Kerry called for a bill that included “additional onshore and offshore oil and gas exploration.”

This is also not just something the John Kerry does.  This is the nature of the beast.  Reactive legislation done in hast and in the shadow of a current problem which usually ends up being poorly thought out and ends up actually doing more harm than good.  Unfortunately, that’s politics today.

The bill aims to cut carbon emissions by 17% below 2005 levels by 2020. It includes cap-and-trade programs for the manufacturing and power-generating sectors and a cap for the transportation sector.

The bill would affect about 70% of the economy, staffers said. They declined to estimate the total cost.

Of course they did – and we’ll all trust the CBO numbers when they come out too – or should we wait for V 2.0 before we agree to the cost?  Bottom line here is if the cap-and-trade program includes “manufacturing and power-generating sectors” the impact will be 100% unless you can point to a sector of our economy that doesn’t use power.

But again, this is the usual way this works – understate the impact, blow off the rebuttals and stick with your estimate hopefully bolstered by gaming the CBO.

Really though – the economy is the number one priority of the people and these yahoos are thinking it is a good idea to introduce a tax that will effect 100% of the economy based on dubious science?

There is some hope though:

A year ago, Reid said passing healthcare reform was simpler than moving an energy bill: “This may surprise some people, but I think healthcare reform is easier than all this global warming stuff.”

I sure as hell hope so.  It certainly would be fun to watch Democrats again ignore the priorities of the electorate (economy, jobs) and go after one of their favorite agenda items.  Fodder for Republicans in November – and frankly, I don’t think they have a chance of passing this before then, or, as a matter of fact, afterwards either.

So go for it Dems – you’ve hooked your electoral wagon to a team of wonderful horses – Kerry and Lieberman – and (tongue in cheek) you deserve everything this ends up getting you.

~McQ

[ad] Empty ad slot (#1)!

Unemployment: And the good news is ….

We added jobs last month.  In fact, according to Reuters we added more to US nonfarm payrolls than we have in 4 years.

290,000 jobs were added in April (66,000 government and the rest private sector).   What this points to is a number that is higher than that which is necessary to keep the unemployment percentage stable (around 140,000 a month) because of the natural turbulence within the jobs market.

On the other hand, with some adjustments, the unemployment rate itself went up .02 percentage points to 9.9% (Reuters mistakenly claims it stayed at 9.7%).

Now this is unquestionably good news.  However, given that 8.2 million jobs have been lost in the recession, a few thousand a month increase isn’t going to change the unemployment rate drastically any time soon.  Most see that rate coming down very slowly over years.  And, as the bad news in Europe continues to grow and markets for American goods there decline,  it is entirely possible that it will flatten out again or even spike a bit before it heads back down.

~McQ

[ad] Empty ad slot (#1)!

Ed Morrissey nails it

Take a look at this little blurb from President Obama’s speech in Quincy IL:

We’re not, we’re not trying to push financial reform because we begrudge success that’s fairly earned. I mean, I do think at a certain point you’ve made enough money. But, you know, part of the American way is, you know, you can just keep on making it if you’re providing a good product or providing good service. We don’t want people to stop, ah, fulfilling the core responsibilities of the financial system to help grow our economy.

Ed latches on to those two highlighted lines to deliver a great rebuttal:

He should have stuck with the TelePrompter. The President doesn’t get to decide when people have “made enough money.” In fact, as the radio host notes, that’s a statist point of view. Furthermore, the responsibility of an entrepreneur isn’t to “grow our economy,” core or otherwise. It’s to grow his own economy. In a properly regulated capitalist system, the natural tension of self-interests create economic growth through innovation and efficient use of capital and resources.

Bingo – well said, old friend.

~McQ

[ad] Empty ad slot (#1)!

Welfare State In Crisis

The bailout of Greece may not work. Spain is teetering on the edge of serious financial doom. The Euro is taking a beating. And the banks of Europe are not looking too healthy overall. Meanwhile, here in the States, unfunded government debt, already expanding at an unprecedented rate, is set to explode. What do all of these things have in common? They are the direct result of expanding the welfare state without any means of actually paying for all of it.

In truth, there is never a way to pay for expanding the welfare state because, while wealth creation isn’t a zero-sum game, the population of wealth-creators is; after all, not just anyone can create electricity, telephones, heart medications, MicroSoft, Wal-Mart, or even pencils without some know-how, sweat and inspiration. If that were possible, then wealth creation could never be retarded, regardless of the impediments. Some wise, noble, and completely selfless individual would always emerge to drive the economy forward. Alas, self-interest trumps all, without which wealth-creation is for the horses.

No matter how ingenious the plan, or divine the motives, the only way for governments to fund the welfare state is to tax the wealth-creators. As even the most Marxist of intellectuals knows, if you want less of something, then tax it. This is why cigarettes are levied against in ridiculous proportions, and why carbon taxes are considered (by some) to be the savior of our planet. Well, taxing wealth-creation works exactly the same way: tax it more, and you will get less of it. Which leads to the inexorable conclusion that, as the governments of the world sink deeper into fiscal crisis, the looters will be coming en masse.

Does that mean that we are in for another Great Depression? Not necessarily. In fact, I predict that no such thing will occur. For starters, we have many institutions in place today that didn’t exist in the 1930’s such as the FDIC, Social Security, Medicare, the IMF, and the World Bank. Some of these things are arguably beneficial in that they smooth out the rough patches that economies inevitably encounter. The U.S. economy, for example, may not have realized the devastation it did if old people, like McQ, could have survived without taxing their families’ resources so much, or the FDIC had been in place to quell bank runs. Maybe. But more importantly, in this day and age our politics and law-making bodies (and those of every democratic society) are dominated by those whose own self-interest is firmly grounded in the ability to buy votes. That ability is highly dependent upon feeding the welfare state, since the vast majority of votes are bought from those who don’t create electricity or heart medications. This is why politicians of all stripes won’t take steps that would decrease the welfare state, because to do so will cost them votes — to the politician who promises more largesse at the expense of whatever hated rival is being villainized at the time. Accordingly, the odds are rather stacked against wealth-creators continuing to employ their skills in service of the very state that punishes them.

Instead of the Great Depression, Part Deux, I would predict that the elites (those, and their friends, who hold the power to dole out goodies for votes) will shuffle the deck just enough to ensure that they stay in favor, while allowing the overall health of the economy to softly fade into oblivion. They are like Dr. Kevorkian administering to capitalism. The ability to create wealth will slowly continue to be arrogated to the governors and “experts,” while the welfare state expands in decrescendo. Eventually, we will be left with something akin to the Ottoman Empire: all power and glory in name only, inside a rotting shell, harkening back to a time so dissimilar as to be unworthy of the title. What’s left will be hopeless, farcical and cruel, and will not have the slightest ability to nurture the welfare state that started it all. Perhaps the “Long Morose” would be a better title.

Irrespective of my gloomy predictions, there simply isn’t any question that, at some point, the beneficiaries of the great welfare state will have to take a bath. Most likely, that day will come when everyone jumps in the tub together. Until that time, prepare for the politically powerful to loot the wealth-creators out of existence in order to pay off the welfare beneficiaries. Eventually the only ones left to take that bath will be the filthy and the unwashed.

More debt pressure on Europe…and US business

Following yesterday’s announcement that Greek debt was downgraded to junk status, today Spain’s debt was downgraded as well. Spain is, in many ways the bellwether for Europe’s debt crisis. Spain has a much larger economy than Greece. So large, in fact, that it may be too big to bail out.

Fortunately, Spain’s debt is still less than 60% of GDP; however, the country is on a reckless fiscal path and the government shows no signs of doing anything about it.

As a result of the growing crisis, the Euro is getting hammered in the FOREX market, while the dollar is soaring. This is, in effect, an interest rate hike for US businesses that export to the Euro zone.

Naturally, this places downward pressure on US export sales at a time where the overall business climate is still weak. So, none of this is good news for the American economy, either.

Shocking news: ObamaCare will increase the nation’s health care costs

Yes, yes, I know – it comes as a complete surprise.  No question, we all thought having more covered by insurance, no pre-existing conditions, no caps on payouts and lower premium costs – all the while run by our efficient government – would surely lower costs.  It’s just logical, right?

President Obama’s health care overhaul law will increase the nation’s health care tab instead of bringing costs down, government economic forecasters concluded Thursday in a sobering assessment of the sweeping legislation.

You know, you want to laugh at this because most people who gave up on moon ponies and unicorns when they were 8 knew that what was promised by this bill wasn’t possible.  But it is hard to laugh at this level of mendacity.  Isn’t it interesting that now suddenly the truth begins to filter out – after the fact, of course.

USA Today, in true sycophantic fashion, tries to lessen the blow to the administration by calling it a mixed verdict. It also notes it is the first look at the legislation by “neutral experts”. That’s because it was so important to rush this bill through without giving anyone time to read or analyze it – you know, so the benefits could kick in … in 2014.

And what do these experts find? Well it is less than a “mixed verdict”. As I read it, it’s an outright condemnation of the law.

[T]he analysis also found that the law falls short of the president’s twin goal of controlling runaway costs. It also warned that Medicare cuts may be unrealistic and unsustainable, driving about 15% of hospitals into the red and “possibly jeopardizing access” to care for seniors.

Translation: this goes to the central political point about the bill. Who among the politicians in DC are going to be willing to take on the necessary cuts to Medicare promised by the bill (to “pay” for it) and alienate one of the most powerful demographic election blocs?

The Medicare actuary says no one.

The report acknowledged that some of the cost-control measures in the bill — Medicare cuts, a tax on high-cost insurance and a commission to seek ongoing Medicare savings — could help reduce the rate of cost increases beyond 2020. But it held out little hope for progress in the first decade.

“During 2010-2019, however, these effects would be outweighed by the increased costs associated with the expansions of health insurance coverage,” wrote Richard S. Foster, Medicare’s chief actuary. “Also, the longer-term viability of the Medicare … reductions is doubtful.”

Of course they are, and anyone but the moon pony crowd knew that going in. It’s like the promise of eliminating “waste, fraud and abuse”. If there was any appetite or ability to do that, don’t you think the estimated $60 billion a year in Meidcare waste, fraud and abuse would have been eliminated by now?

And what if they did make the cuts?  Anyone, what is the likely reaction of health care providers?  Uh, “we don’t take Medicare/Medicaid patients anymore”? That is exactly what will happen.  That means those with government insurance coverage won’t be able to find access (unless that too is eventually mandated). 

A separate Congressional Budget Office analysis, also released Thursday, estimated that 4 million households would be hit with tax penalties under the law for failing to get insurance.

The U.S. spends $2.5 trillion a year on health care, far more per person than any other developed nation, and for results that aren’t clearly better when compared to more frugal countries. At the outset of the health care debate last year, Obama held out the hope that by bending the cost curve down, the U.S. could cover all its citizens for about what the nation would spend absent any reforms.

The report found that the president’s law missed the mark, although not by much. The overhaul will increase national health care spending by $311 billion from 2010-2019, or nine-tenths of 1%. To put that in perspective, total health care spending during the decade is estimated to surpass $35 trillion.

The administration doesn’t even argue the point, claiming that’s a bargain for insuring 95% of the country. Of course, what USA Today doesn’t point out is that 75% of the 4 million households that will be hit with those tax penalties average less than $60,000 a year individually and families making less than $120,000 a year.

Also keep in mind that the CBO analysis and estimate are based in the assumption that absolutely everything in the bill goes as planned – to include the Medicare cuts. Or said another way, the $311 billion “cost’ is a joke and it will most likely cost far more than that.

The CBO also looks at Medicare:

In addition to flagging the cuts to hospitals, nursing homes and other providers as potentially unsustainable, it projected that reductions in payments to private Medicare Advantage plans would trigger an exodus from the popular program. Enrollment would plummet by about 50%, as the plans reduce extra
benefits that they currently offer. Seniors leaving the private plans would still have health insurance under traditional Medicare, but many might face higher out-of-pocket costs.

That brings us back to the politics and the polite word used -‘unsustainable’ – to mean the cuts just aren’t going to happen.

USA Today ends its article with this:

In another flashing yellow light, the report warned that a new voluntary long-term care insurance program created under the law faces “a very serious risk” of insolvency.

What they’re talking about is this:

One other interesting note from this study was a paragraph on the new Community Living Assistance Services and Supports insurance program for home care, known as the CLASS Act.

While it produces a $38 billion net savings through 2019, that’s mainly because you have to pay five years of premiums before you can start taking advantage of the program.

After that, the Medicare Actuary doesn’t like the way it looks in financial terms.

“Over the longer term, expenditures would exceed premium receipts, and there is a very serious risk that the program would become unsustainable as a result,” the study says.

“Unsustainable” – pay 5 years of premiums before you get the first benefit and the “expenditures would eventually exceed premium receipts”. Sounds exactly like every other program I’ve seen designed and engineered by politicians. That’s why we’re in the freakin’ fiscal mess we’re in now.

And the moon pony crowd keeps believing you can get something for nothing and that we can fix crap like this to where it will actually work and cost less too.

Repeal it.

~McQ

[ad] Empty ad slot (#1)!

The New Jersey model

An interesting article in the Wall Street Journal about newly elected NJ governor Chis Christie.  The Republican, elected in a traditionally blue state, ran as if he’d be a one-termer and laid out the distasteful medicine necessary to put the state’s fiscal house in order.  To the surprise of many, he won.  He’s now engaged in doing what he said he’d do.

His assessment and conclusion are solid:

“We are, I think, the failed experiment in America—the best example of a failed experiment in America—on taxes and bigger government. Over the last eight years, New Jersey increased taxes and fees 115 times.”

And what has NJ gotten for that?

New Jersey’s residents now suffer under the nation’s highest tax burden. Yet the tax hikes haven’t come close to matching increases in spending. Mr. Christie recently introduced a $29.3 billion state budget to eliminate a projected $11 billion deficit for fiscal year 2011.

Obviously, as must be done in a state which has the nation’s highest tax burden, Christie has laid out a very aggressive plan that cuts spending to eliminate that deficit. And, as you might imagine, the entrenched interests which will see their budget’s cut are almost unanimous in their opposition. Most the opposition comes from government unions, and especially from New Jersey Education Association, the state’s teacher’s union.

And Christie is using a little of the left’s favorite tactics against them:

“I’m a product of public schools in New Jersey,” Mr. Christie explains, “and I have great admiration for people who commit their lives to teaching, but this isn’t about them. This is about a union president who makes $265,000 a year, and her executive director who makes $550,000 a year. This is about a union that has been used to getting its way every time. And they have intimidated governors for the last 30 years.”

Christie is obviously not going to be intimidated. And he’s got the numbers and, apparently, the public behind his effort to pare the educational establishment down to a manageable and affordable size:

While the state lost 121,000 jobs last year, education jobs in local school districts soared by more than 11,000. Over the past eight years, according to Mr. Christie, K-12 student enrollment has increased 3% while education jobs have risen by more than 16%. The governor believes cuts in aid to local schools in his budget could be entirely offset if existing teachers would forgo scheduled raises and agree to pay 1.5% of their medical insurance bill for one year, just as new state employees will be required to do every year. A new Rasmussen poll found that 65% of New Jersey voters agree with him about a one-year pay freeze for teachers.

The union, of course, has it’s own favored solution and I assume you can guess what it involves:

But the teachers union wants to close the budget gap by raising the income tax rate on individuals and small businesses making over $400,000 per year to 10.75% from its current 8.97%.

Obviously he has a lot of other fights within the state on his hands, such as cutting the onerous regulation regime the state has built, but he has a primary goal and desire to return the state to fiscal sanity. And he also knows that to do that he has to lower overall taxes – if he wants to again attract business and those who earn enough to provide a solid tax base.

The governor aims to move tax rates back to the glory days before 2004, when politicians lifted the top income tax rate to its current level of almost 9% from roughly 6%. Piled on top of the country’s highest property taxes, as well as sales and business income taxes, the increase brought the state to a tipping point where the affluent started to flee in droves. A Boston College study recently noted the outflow of wealthy people from the state in the period 2004-2008. The state has lately been in a vicious spiral of new taxes and fees to make up for the lost revenue, which in turn causes more high-income residents to leave, further reducing tax revenues.

So here’s a governor who understands that what has been heaped on the back of the taxpayers that are left is too much and is looking at other real ways of reducing the cost of government – i.e. actually seeking out where it has become bloated, putting some of the costs of the benefits government workers receive back on them, cutting unnecessary spending all with a goal of eliminating the deficit the state faces. And, by the way, planning on reducing the tax rate with an eye toward luring back the affluent and businesses with an eventual goal of actually increasing tax-revenues, and jobs, and all the other benefits such an influx would bring.

“What I hope it will do in the end is first and foremost fix New Jersey, and end this myth that you can’t take these people on,” he says. “I just hope it shows people who have similar ideas to mine that they can do it. You just have to stand up and grit your teeth and know your poll numbers are going to go down—and mine have—but you gotta grit it out because the alternative is unacceptable.” He also strongly believes that voters elected him specifically to fight this fight. “They’re fed up. They’ve had enough. In normal circumstances I wouldn’t win,” he says.

He’s probably right about that. He probably wouldn’t have won 3 or so years ago.  And he’s right that the voters, as his election demonstrates, are “fed up”.  But, once the cuts start to hit, nothing says Christie will be given the continued support necessary to accomplish his goals.  But he seems to be a man who is going to do all he can to accomplish them. I call it the New Jersey model because if successful, Gov. Christie will provide both the blueprint and the success story which small government/fiscally conservative types can point to when discussing what must -and can – be done at both a state and national level. I’ll be watching the NJ saga develop with great interest over the years, and wishing Gov. Christie the best of luck in attaining his goals.

~McQ

[ad] Empty ad slot (#1)!


Sure is quiet out there

I’m sure you’ve noticed the pattern – when unemployment figures show an increase in jobs, even a tiny one, administration figures can’t wait to find a microphone to announce that things are finally turning around.  When “unexpectedly” bad numbers show up, they want to talk about other things.  This happens to be one of those weeks:

In the week ending April 10, the advance figure for seasonally adjusted initial claims was 484,000, an increase of 24,000 from the previous week’s unrevised figure of 460,000. The 4-week moving average was 457,750, an increase of 7,500 from the previous week’s unrevised average of 450,250.

Now I’m not saying that’s abnormal or something only this administration does, but given the extent and duration of the unemployment situation, increases in the number of unemployed should be unexpected.  And while any increase in jobs is to be seen as a positive sign, until there are multiple months above the + 140,000 level, we aren’t adding any jobs.  That number is seen as what is necessary to maintain an employment rate percentage. So even to maintain a 9.7% unemployment percentage we need that monthly positive number to do so.  The point being, reports like the one above indicate we may see that 9.7% rate nudge upward soon.

Lastly, one of the reasons many experts expect this to be a jobless recovery is because of its length.  Companies who shed jobs over a year ago and have survived and may even be starting to thrive a bit are going to think very hard before they put more labor on.  If they’ve been able to function efficiently – i.e. if their productivity has increased (and thereby their profit) with a reduced staff, they’re very likely to maintain their staffing at present levels.  If they hire it won’t be until they absolutely have too (driven by a significant increase in business) but that could be months if not years away.

Certainly not a rosy picture.

~McQ

[ad] Empty ad slot (#1)!